“Whew! Time really does fly!” Jamie Lee thought as she unpacked from her third weekend in a row visiting colleges with the triplets. It seemed like just yesterday that Jamie Lee and Ross brought the little newborns home from the hospital, and now they are preparing to send the three off to college.

So much to consider. In-state universities or community college for the first few years? Either way, years of saving and safe investment strategies helped Jamie Lee and Ross get the triplets ready for college, although they still do want to make the wisest financial choices. After all, putting three through school is still a major undertaking, even for the most well-prepared.

The triplets are leaning toward the state university, which will help with tuition, compared to the out-of-state schools, although it is still a two-hour car drive from home. This translates into room and board times three for the next four years.

“Should we invest in a small house or condominium for the triplets to live in during their college years?” Jamie Lee wondered. She had a hobby of watching all of the home shows on television, such as Home Reno Nation and Flip This Flop, which made the purchase of a fixer-upper an attractive thought and a possible investment opportunity in the long run.

Jamie Lee and Ross decide to make an appointment with their investment counselor, Jay Hall, and real estate broker, Annie O’Halloran, to discuss their options, as they were unfamiliar with real estate investment opportunities.

Current Financial Situation Assets (Jamie Lee and Ross combined):

• Checking account: $5,000 
• Savings account: $47,000 
• Emergency fund savings account: $40,000 
• House: $475,000 
• IRA balance: $85,000 
• Life insurance cash value: $125,000 
• Investments (stocks, bonds): $700,000 
• Car: $14,500 (Jamie Lee) and $18,000 (Ross)

Liabilities (Jamie Lee and Ross combined): 

• Mortgage balance: $47,000 
• Credit card balance: $0 
• Car loans: $0
• 
  

Income:

• Jamie Lee: $45,000 gross income ($31,500 net income after taxes)
• Ross: $135,000 gross income ($97,200 net income after taxes)

Monthly Expenses:

• Mortgage: $1,225 
• Property taxes: $500 
• Homeowner’s insurance: $300 
• IRA contribution: $300 
• Utilities: $250 
• Food: $600 
• Gas/maintenance: $275 
• Entertainment: $300 
• Life insurance: $375
• 
  

Questions 

1. Compare direct investment and indirect investment real estate classifications. If Jamie Lee and Ross purchase a small house or condominium for the triplets to stay in during their college years, which type of investment classification would they fall under?

2. Mr. Hall discusses the financial liabilities that Jamie Lee and Ross would undertake with the triplets living in a college dorm room that are on top of the usual tuition and book expenses.

Assume that the triplets’ rent for the dorm room is $7,500 per student per year based on double occupancy and a shared bathroom. What is the total amount that Jamie Lee and Ross would owe for the entire four years for the three to stay in the dorms?

3. If Jamie Lee and Ross decide to purchase a small house for the triplets to live in for the four years they are in college, what are some of the financial benefits for Jamie Lee and Ross?

4. Jamie Lee and Ross understand that purchasing the second home for the triplets to use during the college years is not all about saving money by avoiding paying the dorm rent. What are some of the liabilities that Jamie Lee and Ross can expect that are directly connected to owning the second home that might make them second-guess the purchase?